Question

You will receive annual payments of $4,000 at the end of each year for ten years (10 payments). The first payment will be received in year 3. What is the present value (t-0) of these payments if the discount rate is 9 percent.

Answer 1

Discount Rate = 9 %, First Payment to be received at t=3 while current time is t=0, Annual Repayments = $ 4000, Repayment Tenure = 10 years or Number of Repayments is 10

Therefore, Present Value (at t=0) = 4000 x (1/0.09) x [1-{1/(1.09)^(10)}] x [1/(1.09)^(2)] = $ 21606.46